Most people would place me on the political right. Yet when it comes to health care, I am more egalitarian than almost everybody on the left. I always have been.
By that I mean I am more egalitarian than the defenders of the British National Health Service (NHS) and the defenders of Canadas system of socialized medicine. Im also more egalitarian than Paul Krugman and the leaders of the Physicians for a National Health Program.Not only that, but a great many Republicans agree with my approach to health careeven as they oppose ObamaCare.
One thing that adds to so much confusion is that people on the left have a huge investment in seeing themselves as more altruistic and more caring than everybody else. Paul Krugman, for example, refers to the Republican Party as the party of Scrooge and sees most elections as Dickensian morality playseven though research shows that right-of-center folks are actually more generous than folks on the left, on the average.
Today, I ask you to put aside such foolish thoughts and seriously consider the titular issue of this post.
To introduce the discussion, I need to make three distinctions.
First, almost everybody on the left believes in a defined benefit approach to health care. My approach centers on defined contributions. Suppose you live in Britain and your kidneys give out. The British socialists created a health care system that promises to meet all your health care needs, but it may not always deliver. Britain has one of the lowest dialysis rates in all of Europe. In the United States we also take a defined benefit approach to kidney care and we actually deliver. Even if you are 80 years old and dying of cancer you can get dialysis and maybe even a kidney transplantall courtesy of Uncle Sam. But it would be impossible to provide all health care that way.
ObamaCare is an example of a defined contribution benefit approach [thanks to Bob Graboyes for catching that error]. The law will eventually lay out in specific detail all manner of health care people are entitled to receiveoften with no deductible or copayment. But it does almost nothing to ensure that providers will actually be able to deliver what has been promised. After 2018, the problem will get immeasurably worse as the ObamaCare subsidies grow no faster than gross domestic product, while the cost of the insurance that everyone has to buy will be growing at twice that rate.
Were I designing these systems, I would give Britons and Americans a fixed sum of money (the defined contribution) and let competition in the marketplace determine what care can be insured for that sum. For example, a health plan might specify in advance that it covers kidney care for otherwise healthy people, but limited care (and certainly no transplant) for someone who is terminally ill. Unlike ObamaCare, I would allow health plans to adopt cost-effectiveness standards, make coverage decisions based on those standards and advertise this fact in advance of enrollment. (More on this in a future Alert.) In other words, limits on coverage would be visible and transparentnot hidden and murky.
Second, almost everybody on the left prefers rationing by waiting to rationing by price. If you make the money price zero, you guarantee that demand will exceed supply for almost every kind of care. So what determines who gets what? The knee jerk response of people on the left is to assume that rationing by price favors the rich while rationing by waiting favors the poor. In fact the reverse is often true. If there are long waits to see doctors, rest assured that the wealthy and the powerful will get to the head of the queue in almost every country. But walk-in clinics (with posted money prices) are potentially providing low-cost, high-quality care to low-income families in cities all across America.
Finally, every system in which care is rationed leaves individuals with the opportunity to pay out of pocket to obtain the care they cannot promptly get from their primary insurer. In Britain there is a vibrant parallel system of private care and private health insurance alongside the NHS. In Canada, there are fewer private options, but Canadians can cross the U.S. border for careand many do. Invariably, people with money who are also defenders of socialized medicine take advantage of these optionsgiving rise (naturally) to charges of hypocrisy.
I would incorporate out-of-pocket spending options in a much fairer and much more straightforward way. I would encourage everyone rich and poorto consider adding to their public subsidy personal funds to obtain more care and prompter care. For example, an estimated 25,000 British cancer patients die prematurely because the NHS does not cover drugs that are routinely available in the United States and on the European continent. These drugs are generally very expensive and in most cases they are probably buying only a few months more of life. Patients who buy them privately, however, do so at considerable personal expense. I would allow supplemental insurance to cover the cost of these drugs and this insurance would likely be very inexpensive if purchased by healthy people.
More generally, I would allow people to add to their defined contribution and buy richer, more generous insurance if that is what they prefer.
Now to the Goodman plan for national health insurancewhich is more liberal than all the plans that liberals seem to like.
I would offer a fixed sum, refundable tax credit to everyone. The amount would be roughly $2,500 for an adult and $8,000 for a family of four. The subsidy would be financed by replacing existing tax subsidies for health care and health insurance and by making some other tax credits (such as the $1,000 child credit and the Earned Income Tax Credit) conditional on proof of insurance for children.
The family tax credit I would offer is about half of the cost of typical employer family coverage. Nonetheless, I would expect insurers to begin offering plans that cost $8,000 or a little bit more. They would control costs by offering narrow networks (much as Walmart is now doing for its employees) and by eliminating coverage for procedures with marginal or questionable value. People who want to see any doctor and enter any hospital with very little out-of-pocket expense at the time of treatment would have to pay closer to $16,000 in annual premium. But that extra payment would be after-tax, with no subsidy from the government.
[Notice how easily I just solved the problem of cost. Those who want it can pay less for care than what the British paywithout a single demonstration project!]
People who turn down the tax credit and elect to remain uninsured would not be completely out in the cold. Unclaimed tax credit money would be sent to safety net institutions in the communities where the uninsured live. If the uninsured need care and cannot pay for it, these funds would be available for that purpose. In a sense, I am describing a system of universal coverage even though not everyone would have an insurance card. Also, in the safety net system I would expect that rationing by waiting would be common.
The Obama administration the other day announced a long list of people who would not be subject to the ObamaCare mandate to buy health insurance. These included the Amish, Mennonites, legal aliens, Indian tribes, the homeless and millions of people who are not required to file income tax returns. By contrast, I would not have any mandate and I would not leave anybody out. I would offer the tax credit to everyone. I would also make unclaimed tax credit money available to pay for the care of any uninsured person who cannot pay his medical bills.
I would keep Medicaid as a backstop. Anyone, even Bill Gates, would be free to add about $500 to his refundable tax credit and enroll in Medicaid. By the same token, people in Medicaid would be able to leave that system and claim a tax credit to purchase private coverage if they prefer. [Hey, if the left wants a public plan option competing with private options, Im happy to let them have it.]
I would not allow anyone to game the system, however. People would not be able to wait until they get sick to buy insurance or upgrade to more generous insurance with impunity.
I would place very few restrictions on what people must buy to qualify for the tax credits, other than these two: (1) reasonable catastrophic insurance and (2) change of health status insurance that would pay the extra premium needed if a persons health deteriorated after becoming insured and there was a need to switch to another health plan. The first restriction protects society by insisting that people insure for care they are unlikely to be able to pay for on their own. The second leaves the insurance market free to price riskthereby allowing a market for the care of sick people to thrive and flourish, as health plans compete to solve their problems.
There are some transition issues that I will ignore here except to say that I would keep one ObamaCare program that could be very useful: the federal risk pools. These are a much better way of dealing with the problems of pre-existing conditions than destroying the market for risk. The risk pools should also provide change of health status coveragepaying the extra premium needed if a chronic patient leaves the risk pool and enters another plan in the future.
So there you have it. Except for temporary extra help for the chronically ill (risk pools) and what should be temporary help for the poor (Medicaid), government would essentially treat everyone the same. It would give everyone the same basic subsidy and leave individual choice and the marketplace free to solve the remaining problems.
The result would be a system that would be unquestionably more equitable than what you see in either Britain or Canada and a lot more equitable than what we will experience under ObamaCare.
|John C. Goodman is a Senior Fellow at the Independent Institute. The Wall Street Journal and the National Journal, among other media, have called him the Father of Health Savings Accounts.|